Marketing budgets to shrink for media & entertainment

According to a new Ernst & Young global survey of CFOs on the media and entertainment industry, there will be growth in new distribution channels but marketing and branding could fall victim to cost-saving measures.

Canada’s media and entertainment industry will experience digital growth but investing in digi means reducing more traditional cost areas, according to a new Ernst & Young survey released yesterday.

When asked which trends will have the greatest impact on the media and entertainment industry, 50% of Canadian survey participants cited ‘reduction in marketing and advertising budgets,’ while 44% view ‘control content and marketing costs’ as an area for cost savings. Survey information is the result of interviews conducted with CFOs from leading global companies from a cross-section of all sectors of the media and entertainment industry.

Only 25% of Canadian participants see ‘brand enhancement’ as an opportunity for revenue growth. Other areas where costs could better be managed in the next couple of years include process improvement (69%) and integration and optimization of technologies (63%), the report said.

In contrast, most Canadian respondents see growth potential in new distribution channels (75%) and many execs plan to use new products and services as their main driver of growth and revenue (63%). The companies that were identified as best positioned for future growth in the industry by Canadian CFOs are cable operators (63%) and internet/interactive media (56%).

‘The greatest challenge is finding a way to make money in a digital world, and determining how to price digital entertainment,’ said Neal Clarance, leader of Ernst & Young’s Media & Entertainment practice in Canada, in a release. ‘The company that comes up with a winning formula is sure to become an industry leader, but in the meantime, a lot of money will need to be spent searching for a solution.’

Ernst & Young research indicates that consumer time spent using mobile devices for entertainment, news and personal use has increased by 200% globally in a five-year period, while video game use is up 47%. In turn, time spent on traditional media, including TV and radio, is declining. By 2012, the average price per unit of home video and music content will have decreased by nearly 50% from 2006 levels, the report predicted.

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